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Firm Heterogeneity and Location Choices: Evidence from Foreign Manufacturing Investments in China

School of International Trade and Economics, University of International Business and Economics, Beijing, 100029, China, hongjunjie{at}alumni.nus.edu.sg

This paper develops a model which indicates that foreign firms’ location choices are determined jointly by site attributes and firm heterogeneity. The model is estimated using data on 2565 foreign manufacturing investments in China. The conditional logit estimates and simulation results provide supportive evidence. An increase in a firm’s labour intensity magnifies the impact of labour cost, while a location’s local communications infrastructure has a stronger influence on foreign firms that have adopted modern information technology. It is also found that agglomeration effects decrease with firm size and labour quality. Implications for researchers and policy-makers are discussed in the conclusion.

Urban Studies, Vol. 46, No. 10, 2143-2157 (2009)
DOI: 10.1177/0042098009339425


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